Committee briefing: Public sector pay

ePolitix.com reports on Thursday's public administration committee meeting on public sector pay issues.

Witnesses:
Polly Toynbee, the Guardian
Tony Travers, London School of Economics
David Clark, Solace
Ben Farrugia, Taxpayers Alliance

All witnesses appearing before the Commons Public Administration Committee agreed that there is a problem with executive pay in the public sector today.

But the panel was divided on whether the government should legislate on public sector pay.

David Clark from Solace told MPs that in a recession there was bound to be "envy" about high salaries in publicly-funded bodies.

"Quite evidently there is an issue, in that it wouldn't be in the public domain so often were they not," he said.

He drew on the "concentration" of high executive pay in local government as an example, one of the few areas where democratically elected people can determine the wage level.

"In a time of recession, one of the things my colleagues are very clear about is that there is going to be a degree of envy about that and some understanding that somehow these people are protected," Clark commented.

He called for local government officials to have their wage published alongside their workings and activities.

He explained: "There is an issue of transparency but that is not just about pay. It is about activity too."

Likewise, Polly Toynbee from the Guardian expressed opposition to high salaries in the public sector but she called for the debate to be viewed in context.

"People are very concerned if they see what they consider to be very large numbers of people earning more than the prime minister, for instance," she told the committee.

But she continued: "I think though, it is unfair to look at it in isolation from the general culture outside.

"What you have actually got is a relatively small leakage from the extraordinary escalation of pay differentials over the last 20 years."

"When you see that explosion of top pay, mostly in the top one per cent, it is not surprising that there is some leakage. In fact, in some ways it is surprising it is not more," she added.

I do think it is a "symptom" of a larger disease, Toynbee stated.

Later in the debate, she attacked the BBC, who she claimed "got it wrong" on pay. And she agreed that allowing all tax returns to be made public was a good idea but had some reservations.

Tony Travers, from the London School of Economics, warned of "sharp" rises in public sector pay in the last two or three years.
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He explained that, in part, this came from the private sector high pay increases.

Public-private partnerships have made executive pay a "very murky" area because of the difficulty in categorising what is public and what is private, Travers said.

The example of Capita was raised and Travers specifically pointed to the private companies completing London Underground.

They perform solely public sector work but are classified as private sector, he explained.

This makes public accounts difficult especially what is on the budget sheet, he added.

"It would be very difficult to defend not having [public sector salaries] in the public domain," he argued. "It is public money."

In part, he blamed the emergence of high executive salaries on head-hunters, who "jolly up the pay a bit" to entice people from the private sector.

Ben Farrugia of the Taxpayers Alliance said that he was concerned about the use of "rewards for failure".

He warned of "inflated salaries" and a "lack of transparency".

"I think that we need much greater transparency and greater scrutiny," he told the committee.

But Farrugia came under attack from John Pugh (Lib Dem, Southport), who said the body was a "witch-finder general" riding into the public sector.

The alliance shows a "rabid hostility" anyone working in the public sector, he said.

Committee chairman Edward Leigh (Con, Gainsborough) asked why the Taxpayer's Alliance was not interested in investigating tax avoidance or tax havens.

Farrugia explained that the body was solely concerned with public sector pay and did not deal with the private sector.

He argued that local government authorities in particular were "extremely reluctant" to reveal pay.

"So far, it has been local government that has been the hardest nut to crack," he said.

Travers expressed an interest in investigating the gap between the highest and lowest paid employees in a public sector body.

He estimated that the ratio for a local government pay gap would be between 4:1 and 6:1.

He called for more local pressure on public sector pay, not central legislation.

One MP suggested that the Equality Bill could create more openness on public sector pay, and Toynbee agreed that it would be a step forwards.

Toynbee also called for fewer honours to be awarded to bankers, with more going to those who genuinely work hard for the public sector.

Looking to other routes to combat inflated salaries, Keith Hill (Lab, Streatham) pointed to the Network Rail, Royal Mail and Channel Four as three companies who have issues around who sits on their remuneration committees.

It is usual for members of a board of a firm to sit on its own remuneration committees.

If the government really wanted to influence salaries and bonuses, Hill suggested, they could get someone who represents the public to be a member of a remuneration committee.

Toynbee suggested that by having remuneration committees and boards, these public sector bodies were making themselves look like a private sector company.

Travers also claimed that the government would have to take responsibility at some level for systems of high pay, as seen with National Rail.